World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.

Friday, July 31, 2009

Say goodbye to July, it’s been a very hot one in the great northwest and it’s been hot in the markets too. Too hot. Look at that P/E ratio - can you say, "market distortions?" I though you could!

How about, "government gone wild?"

And the markets are selling off on the GDP release this morning (but now bouncing back), gee, do you think maybe Goldman’s computers had the data a little early yesterday afternoon when the markets tumbled out of nowhere? I think the many insiders who surround Obama must have also whispered in his ear as he was talking like he knew the number already, which I’m sure he did.

The MANIPULATED GDP result came in at -1% for the second quarter of 09. Here’s Econoday’s take, I’ll get to the manipulated part in a minute:

HighlightsThe economy is coming closer to the end of recession based on the advance estimate for second quarter GDP. The economy contracted in the second quarter by only 1.0 percent, following a revised 6.4 percent drop in the first quarter. The second quarter was close to the market consensus for a 0.7 percent dip. Today's report contains historical benchmark revisions to GDP. The previous estimate for the first quarter decline was 5.5 percent.

Weakness in the current quarter was almost offset by component strength. Pulling down GDP in the latest quarter were business fixed investment, housing, personal consumption, and inventories. Strength was found in a sharp narrowing in the trade gap and a rebound in government spending.

But what led to an easing in the rate of decline-where was the second derivative positive? The slowing in the rate of decline in the latest quarter was due to a slowing in the decline in inventories, less negative business fixed investment, less negative housing, a gain in government spending, and a narrowing in net exports. The big negative was a drop in personal consumption.

On the inflation front, the GDP price index rose a meager 0.2 percent after gaining a revised 1.9 percent in the first quarter. The first quarter increase previously had been estimated to be 2.8 percent annualized. The consensus had expected a 1.3 percent gain for the second quarter.

The historical revisions to GDP broadly show the current recession was deeper than earlier believed. All but one quarter of the recession was revised down.

Looking ahead, low inventories point to a rebound in production in the third quarter with motor vehicles almost certainly to be a sizeable contribution. However, the consumer will likely lag. Markets should like today's numbers since it strengthens the case for a rebound in the second half and possibly even the third quarter.

Now I’m going to tell you that the GDP figure is so tampered with that it has NO CONNECTION TO REALITY AT ALL. The distortions begin with the manipulated inflation readings which translate into malformed “deflators” that are used to calculate the GDP numbers. And the absolute last straw, as far as I’m concerned, is the latest manipulation via revisions from the BEA (Bureau of Economic Analysis). Here’s their latest report: News Release: Gross Domestic Product (GDP) .

Scroll down to the bottom of the page and you will find their explanation of the revisions to our growth history all the way back to 1929!

So get this;

- revisions from 1929 all the way to 2008 are revised HIGHER by .1%...

- In 2008, they revised GDP DOWNWARDS from 1.1% growth all the way to only .4% growth, meaning that the economy was much worse than you were told – again.

- To throw salt in that wound, from Q4 of ’07 to Q1 of ’09 (the last reported quarter), real GDP decreased at a 2.8% rate versus the previously advertised decrease of 1.8%!!! How big is that? It’s a 56% downward revision in GDP for the entire period of the bear market so far!! 56%!!!

Are you kidding me? Do you believe what they are telling you about today’s GDP? I don’t. All I can say is that the data is WORTHLESS. It now has no meaning and no connection to reality. You cannot even compare today’s numbers to history to come to any rational conclusions.

The BEA, the BLS, in fact ALL government reports are suspect. All reporting of government statistics should be scrapped. The Fed should be abolished, The central banks and bankers should be removed – as in gone, a new money system should be put in place, there should be a Constitutional Amendment dictating the SEPARATION OF CORPORATIONS AND THEIR MONEY FROM STATE, and finally, there should be a new government agency responsible for collecting and reporting economic statistics and that agency should have a mandate to develop data collection methods that cannot be changed over time and there should also be a mandate to release RAW DATA with every report, there should be absolute transparency in that all the calculations and all collection methods should be easily viewable by anyone. Oh, and NO ONE, not even the President should have access to the information before the public!